Personally I am not a fan of hay as bedding for sheep. It gets wrapped around their feet, it is nothing like as absorbent as straw : it's a No from me. (But as a step en route to being compost, yeah, maybe - perhaps hay then a scattering of straw on top?)
From your description it sounds as though the hay isn't
bad, just they don't like it (or maybe just don't actually need it right now? Mostly they won't eat hay, however nice it is, if there is enough grass
)
If it smells nice (like new-mown grass, not musty) you could either hold onto it and try it again in winter when they
do need extra, or offer it to any local native pony folks. We types are always on the lookout for hay with poor nutritional quality for our "good doers"
! lol